The real reason Meta's bleak 'AI vision' is winning out
Last month, Meta announced that it was going to begin firing thousands of “low-performing” workers as it shifted to a strategy that focused on AI. When the DeepSeek launch upended other American competitors and sent Nvidia shares downward, investors noted that Meta too has an “open source” approach to its AI model, Llama, even though its Meta AI is rarely in conversation with OpenAI’s ChatGPT or Anthropic’s Claude as a leading consumer product. Meanwhile, revelations surfaced that Mark Zuckerberg had likely personally OK’d the pirating of vast troves of data to train that model. On Monday, the layoffs began. Here’s how the stock market has responded. Per Bloomberg, Meta shares saw a rally of 16 straight sessions, the longest streak of any current Nasdaq 100 Index company going back to 1990. The stock added more than 17% over the surge, bringing its market capitalization above $1.8 trillion.
That story is headlined, “Meta’s 16-Day Winning Streak Is Victory for Zuckerberg’s AI Vision,” and that is indisputably true, if you consider “own a monopoly social media network and web infrastructure that is so large you can do anything you want on it” plus “do crude identity politics to placate the new president” as an “AI vision.” But it is important to understand why it is that investors are cheering Meta, while OpenAI is facing more and more hurdles, its broader picture getting bleaker by the day. Before we dive into that, however, a brief note that paid subscribers make this newsletter possible—it takes many hours to research, report, and write these columns.
The Shift in AI Landscape
As the Great DeepSeek Event made clear, OpenAI’s (and Anthropic’s, and other AI model-making companies’) biggest issue now is that AI chatbots are on the brink of becoming a commodity, if they haven’t already. Building AI models, like OpenAI does, is suddenly a pretty bad business to be in. It’s expensive, and for all but the most invested users, the experience of using most chatbots on the market is becoming less distinguishable.
The Challenges Faced by OpenAI
This is why OpenAI is focusing more and more on its ChatGPT app, which is popular, but still incredibly expensive to run, its enterprise businesses, and government contracts. Musk has just thrown up another roadblock to OpenAI; he formed a consortium to offer a $97.4 billion bid for control of the company. OpenAI’s first enterprise contract with the federal government was with… USAID. Given the current circumstances, it seems unlikely that the contract will remain intact for long, if it hasn’t been cancelled already.
The Rise of Meta
Back to Meta, investors are cheering Meta primarily because of its strategic shift towards AI, reflected in CEO Mark Zuckerberg's plans to invest heavily in AI projects. The company's results have shown improvement, especially in how ads are targeted to its billions of users. Zuckerberg's alignment with President Donald Trump has also potentially eased regulatory concerns, contributing to the stock's rise.
Investor Perspective
Meta's success lies not necessarily in the creation of groundbreaking AI products, but in its dominance as a digital real estate giant and its outward commitment to AI development. Despite user concerns about AI implementation, investors are drawn to Meta's market position and strategic moves.
As technology companies continue to prioritize economic value over user experience, Meta's focus on AI and market dominance sets it apart in the eyes of investors, even amidst controversies and challenges faced by its competitors.
